2020 began as a year poised for rapid transformation in the global semiconductor industry. Investments in new fab construction were initially expected to leapfrog by US$12 billion to nearly US$50 billion. SEMI’s World Fab Forecast report reveals that China aims to generate additional capacity dedicated to foundries followed by Europe and the Middle East with fab developments valued at over US$11 billion.
Today, US-listed firms accounts for 48% of the global market, while China, in 2018 alone, was responsible for 20% of global revenue. The trade war between these two powerhouses prompted a partial decoupling with multinationals shifting production to other countries — particularly, Vietnam (Source: New York Times).
Undeniably, the ongoing challenges from the coronavirus have perhaps become the tipping point, accelerating the need for alternative sources – against the backdrop of evolving geopolitics, increased protectionism and rise of smart cities and niche technologies (beyond Moore’s law). The new imperative is for fab nations, greenfield or transformation project owners to rethink the traditional approach to fab development, costing an average of US$3 – $5 billion today.
Next-gen Smart Fabs Shift Focus to OpEx Efficiencies
The advent of Industry 4.0 and digitalisation gives way for Smart Fabs and mature site optimisation that focuses on capital expenditure (CapEx) to drive continuous improvements in operational expenditure (OpEx). These considerations are the cornerstones to ensuring supply chain integration through Cost and Revenue programmes.
Beginning with the digitalisation of design and construction processes to asset-based servitisation (spare parts, product repairs, maintenance, overhauls, equipment training, etc), leverages IoT sensors and solutions for real-time data to optimise OpEx efficiencies (cleanroom control, preventive maintenance capabilities, etc).
Aside to achieving site reliability, Smart Fabs enable business viability, allowing for product customisation to meet market needs with different technologies and products. This includes the ability to mix CMOS production with emerging technologies such as Silicon Photonics (SiPh), Gallium Nitride (GaN), and Micro-electromechanical system (MEMS).
“Servitisation” as a Competitive Advantage
Product-based strategies drove efforts in technological innovation, quality improvement and costs reduction.
As manufacturers look to differentiate by transforming their business model from product-dominant to customer- and market-centric, “servitisation” is rapidly gaining traction.
The servitisation model in turnkey and greenfield projects provides public and private stakeholders with an opportunity to capitalise on key specialisations to ensure venture’s viability alongside national aspirations. To meet the demand, Innovative Global Solutions & Services (IGSS) has developed a “Build-Operate-Manage-Transfer (BOMT)” programme to guide semiconductor manufacturers in their servitisation journey, starting with tool refurbishment, real estate management and other forms of capital expenditure. In operating expenditure, the BOMT programme leverages Industry 4.0 and IoT technology to enable services such as process control and product quality.
As production becomes highly automated, servitisation can become a high-margin revenue stream and key source of employment, particularly in advanced “last mile” development support in the pre-fabrication stages. These include consultancy, R&D, as well as design and prototyping.
Business and operation sustainability address underutilisation challenges
The pursuit of operational sustainability goals is a key aspect to consider. Running fabs is a resource-heavy endeavour and the industry is under tremendous pressure to mitigate operation impact. Fabs are also expected to decrease greenhouse gas emissions. Industry players are incorporating relevant operational strategies as they align themselves with international movements such as the United Nations Sustainable Development Goals (SDGs).
Tapping into servitisation measures and Big Data from IoT / analytics technologies, manufacturers can use assets longer to create less waste, implement optimised electrical distribution architectures, as well as other physical infrastructure that capitalises on the promise of Industry 4.0.
In Singapore’s Context
Boosting capabilities in quality, variability, productivity and reliability, digitised supply chains have shown to deliver annual growth by 3%
(Source: The secret world of semiconductor, FedEx Singapore). Moreover, the shift towards alternative source solution strategies, in tandem with Singapore’s Smart Nation goals in itself provides the demand for semiconductor technologies in applications such as mobility, healthcare, AI, 5G, etc, bodes well for the nation and industry players. A growing school of thought is how digitalisation might just be a key solution to balancing the need for physical distancing and business continuity, in the new normal.
ABOUT THE AUTHOR
Chief Operating Officer
Innovative Global Solutions & Services Pte Ltd